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Tag: CBRE

Record consumer spending continues to drive warehouse space needs

Bridgeport 78 under construction in Phillipsburg, New Jersey. PHOTO/SUBMITTED –

Unprecedented consumer spending is continuing to drive demand for commercial real estate in the Lehigh Valley according to the latest Northeast Industrial Brief from CBRE. 

Consumers spent a record $565.8 billion in the U.S. in October 2021, putting added stress on an already overwhelmed supply chain system. 

The report shows that port activity increased by 16.1% in 2021 and the lack of warehousing space for those imported goods has meant industrial rents continue to climb. 

“A lot of tenants that want to be closer to the ports are priced out of the market,” said Vince Ranalli, executive vice president for CBRE. “Real estate costs are a lot lower by moving west.” 

He said that is sending tenants into the Lehigh Valley, Berks and even Central Pennsylvania markets. 

The demand has pushed rent up 20% over last year and most Class A industrial space is leasing for about $8 per square foot in the region. 

“Still, that’s a bargain compared to some areas closer to the ports. We can be a third of the cost,” he said. 

The Lehigh Valley currently has an industrial space vacancy rate of about 4%, which means those rents are likely to keep climbing to keep up with the demand. 

The demand and low vacancy rate also means new construction continues at a rapid pace. 

“We have about 9 million square feet of space under construction right now and 41% of that is pre-leased. The building is still going up and it’s already leased,” Ranalli said. 

The Lehigh Valley does have another advantage in attracting these commercial tenants, Ranalli said, and that is scale. 

With more open space the region can deliver larger warehousing and logistics facilities than the denser urban areas closer to the ports in Newark and Philadelphia. 

He cited Bridgeport 78, the development underway at the former Ingersoll Rand property in Phillipsburg, New Jersey. 

That development can support an industrial building up to 1.4 million square feet. 

“That’s what differentiates us. We can still deliver these types of projects,” he said. 

The report did note that the heavy demand for light industrial space goes throughout the Northeast U.S. 

“We have never before seen dynamics like these play out in the market — insatiable consumer demand, booming port activity and a dearth of available industrial space throughout the Northeast,” said Thomas Monahan, a vice chairman at CBRE. “While 58.5 million square feet of industrial space is under construction in the region, most of which is already pre-leased, only 6.5 million square feet. is in port-adjacent submarkets. 

Monahan said it’s clear by the numbers that even the new construction will not be enough.  

The company’s research shows that demand will continue unabated throughout 2022, far outstripping supply. 

Record CRE activity continues in region, driven by supply chain concerns

COURTESTY/CBRE –

 

Recent reports of such supply chain problems as the 80,000 cargo shipping containers piled up at the Port of Savannah and ships waiting up to nine days to offload their cargo, illustrate why the commercial real estate market is booming in Eastern Pennsylvania along the I-78/I-81 corridor. 

Retailers are having trouble getting their goods delivered in a timely manner and that can have a strong negative impact on business if they fail to have the inventory they need for high-demand seasons such as Back-to-School or the Christmas holidays. 

“If retailers can’t hit that, there’s going to be major implications,” said Sean Bleiler, senior vice president for CBRE. “It’s not just about a kid not getting the backpack they want. Their stock is going to get hit if they can’t get theses goods off the ship and into their stores.” 

That’s driving these companies to want to store their goods closer to home, and it’s having a continued major impact on the commercial real estate market in the region. 

Bleiler said the I-78/I-81 corridor saw record activity in the third quarter, surpassing the record numbers of the first and second quarters of the year. Most of that – especially in the Lehigh Valley – was driven by third-party logistics providers and ecommerce companies looking to house their products and distribution in the dense population region of the Northeast. 

According to the most recent CBRE report on the corridor, there was a mere 4.6% vacancy rate with 25 million square feet of new construction in the pipeline. 

“A lot of that is already pre-leased so net absorption is actually outpacing construction,” he said. 

In the Lehigh Valley alone there is 9 million square feet of industrial buildings under construction with a 4.6% vacancy rate. 

The Central Pennsylvania region is slightly tighter. It has 7.7 million square feet of industrial space under construction and a 4.4% vacancy rate. 

The demand is driving rent for commercial properties to record levels across the board. 

“The Lehigh Valley is the most expensive on a square foot basis because of its proximity to the New Jersey and New York markets,” he said. 

However, he said as prime properties become rarer and more expensive, the market is being driven westward into Central Pennsylvania and beyond where there is the potential for more developable land. 

“Five years ago, building 30 or 50 miles west may not have made a lot of sense, but now that’s making sense,” he said. 

The report shows current commercial rents are averaging $5.60 per square foot., a year-over-year increase of nearly 20%. It added that the lack of availability, particularly for class A spaces, has led to tenants entering competitive bidding wars.  

As a result, Class A base rents written into leases averaged $6.13 per square foot during the third quarter, a 2% premium over average Class A asking rates. 

With supply chain problems expected to continue, and logistics changes brought about by the COVID-19 pandemic, Bleiler said CBRE sees no end in sight to increasing demand for and cost of commercial real estate along the corridor. 

“We’ll see rates continue to rise quarter over quarter and we’ll continue to see record rates and construction isn’t going to be able to keep up,” he said. “We think it will continue for the foreseeable future at this point.” 

Light industrial rents skyrocket 30% in Northeast, but the Lehigh Valley may benefit

Courtesy/CBRE –

Rent prices for logistics facilities in the Northeast U.S. Corridor are skyrocketing, but that may be good news for developers and property managers in the Lehigh Valley and Central Pennsylvania.

A report by CBRE shows that rents for light industrial properties rose nearly 30% during the first half of 2021 compared to the first half of 2019, before the COVID-19 pandemic drove the demand for such properties.

According to Vince Ranalli, executive vice president for CBRE, rents in the Lehigh Valley and Central Pennsylvania are averaging around $7 per square foot for Class A industrial space. But, that’s still much lower than other regions along the corridor, making sites in the Lehigh Valley and Central Pennsylvania more attractive.

The Pennsylvania I-78/I-81 corridor, which encompasses the Lehigh Valley, Central Pennsylvania and Northeastern Pennsylvania has had an average Class A industrial rent increase of 11.8%, which while significant, is still drastically lower than Central New Jersey, which has seen rents increase by 49.32%, the Philadelphia area market, which has risen by 47.31% and Northern New Jersey, which has seen a 31.01% increase in rents prices.

“The Lehigh Valley is still a bargain compared to other areas,” Ranalli said. “We see tenants all of the time that are priced out of the other markets and want to be in the Lehigh Valley.”

Meanwhile the demand for such properties is continuing at a staggering rate.

Vacancies within the Northeast Corridor dropped more than 70 basis points during the first six months of 2021, settling at a record low of 3.3%

“That’s historic,” Ranalli said. “We’ve never seen that before.”

But demand is only part of the reason that rents are rising so drastically.

Costs for developers building the properties are also on the rise. The cost of materials has skyrocketed. Steel, for example, is costing more than three times what it did last year.

Labor costs have also gone up dramatically, all of which go towards the cost of building these industrial facilities and contribute to higher rents.

But the demand for Class A, modern industrial space isn’t slowing down and developers are leasing out properties faster than they can build them.

“We’re seeing a lot of pre-leasing, which is something we’ve never seen before,” Ranalli said. “These buildings are being leased while the walls are still going up.”

The biggest challenge in the Lehigh Valley and Central Pennsylvania right now is a lack of property to develop.

“All of the easy sites are gone. I’ve said it before, developers are having to get creative to find new sites to develop,” he said.

And it’s a trend he said he doesn’t see slowing down anytime soon, so those looking to lease light industrial properties should consider the higher prices as the new standard of what to expect.

CBRE names Beares to lead regional market

Rija Beares –

CBRE has named Rija Beares to lead its Greater Philadelphia Region, which includes both the Lehigh Valley and Central Pennsylvania in addition to downtown and suburban Philadelphia, Delaware and Southern New Jersey.

In her new role as advisory services market leader, Beares will be responsible for driving the company’s growth strategy in the region and leading the company’s advisory services business including leasing, sales, valuations, debt and structured finance and property management.

“After a thorough review process, Rija emerged as the clear choice to take the Philadelphia business into the future,” said Michael Caffey, regional president for CBRE’s North Region. “Not only is she highly regarded as a leasing professional by her peers and clients, she is also well respected for her leadership qualities, work ethic and her ability to manage complex situations with aplomb.”

Beares joined CBRE in 2002, advising institutional and entrepreneurial owners in structuring lease transactions and developing lease-up strategies.

In 2010 she began focusing exclusively on representing corporate occupiers of real estate. She also served as the leader of CBRE’s technology and Media practice for the Greater Philadelphia region.

She will be based out of Radnor.

California developer buys Schuylkill logistic center for $25.7M

The 2.4-million-square-foot Rausch Creek Logistics Center in Valley View has sold for $25.7 million. RENDERING/SUBMITTED –

A Schuylkill County logistics center has just been sold for $25.7 million.

CBRE reports that it arranged the sale of the nearly 2.4 million-square-foot Rausch Creek Logistics Center in Valley View to California-based Panattoni Development Co.

CBRE represented the seller, Tremont FT LLC, which is an affiliate of Viridian Partners.

“Located in the heart of Pennsylvania’s I-78/I-81 Industrial Corridor, Rausch Creek Logistics Center will offer tenants superb access to major industrial markets in the Northeast,” said Michael Hess, an agent with CBRE involved in the sale. “Panattoni Development specializes in build-to-suit and speculative industrial development. With limited inventory in Central Pennsylvania and the Lehigh Valley, and with a 75% LERTA tax abatement available, this state-of-the-art industrial park will attract an array of prominent industrial users.”

The logistics center sits immediately off of Exit 107 of I-81, and just 18 miles from I-78.

It will consist of Building 1, which will be 1,346,755 square feet.

Speculative construction is expected to begin soon with delivery in the third quarter of 2022.

Building 2, which is 1,040,540 square feet, will be pad ready to begin speculative construction in early 2022.

 

Construction boom continues for Light Industrial properties along I-78/I-81 corridor

JW Industrial Park at Route 329 in Northampton is one of the many light industrial projects currently under construction. PHOTO/CBRE –

The overwhelming demand for light industrial and warehousing space along the I-78/I-81 corridor should last through the end of the year and likely beyond, said Vince Ranalli, executive vice president for CBRE.

The company has released its latest report on development in the corridor, which shows available space running out, new development on the upswing and an overall hike in leasing costs.

“We’re ahead of where we expected,” Ranalli said. “I don’t think anyone could have imaged since the pandemic how much space we would absorb.”

The corridor had a record-setting 7.9 million square feet of absorption in the second quarter of 2021 alone.

“That’s nearly 8 million square feet of space in one quarter. I remember when 8 million square feet was a good year,” he said. “It’s unprecedented and we see no signs of a slowdown.”

Overall vacancy fell to 5.8%, further underscoring the record demand for space.

To meet the demand, developers are building new facilities as fast as they can.

In 2020 5 million square feet of new construction was completed.  About 9 million square feet of new light industrial construction is in the pipeline.

The Northeast Pennsylvania and Lehigh Valley markets posted the highest occupancy gains in the second quarter, accounting for most of the net absorption.

In the Lehigh Valley, much of the occupancy growth was from the 3.6 million square feet of construction deliveries as very little existing Class A space is available within that market.

While the bulk of the construction remains in the Central Pennsylvania and Lehigh Valley markets, because of the lack of available properties in the Lehigh Valley and Central Pennsylvania area, the report shows gains in the Northeastern Pennsylvania region.

Northeastern Pennsylvania now represents 16.1% of the overall development in the corridor with 3.1 million square feet under construction.

 

Sticker Shock

Available land is the one thing slowing down development.

For those who do want the access in the Lehigh Valley, Ranalli said, they have to get creative.

Companies looking to build out their network of warehouse and logistics space are turning to brownfields sites, where they are knocking down old buildings and constructing new facilities.

Ranalli gave Bridge Point 78 in Phillipsburg, New Jersey as an example. The 3.85-million-square-foot industrial complex was created on the site of the former Ingersoll Rand.

In other cases, developers are knocking down old office buildings or shopping centers to build logistics facilities because of the changing market due to the shifting consumer preference towards ecommerce.

The demand for space, coupled with drastically rising construction costs has led rents to record highs, Ranalli said.

“Some tenants are really getting sticker shock,” he said.

According to the report, Northampton County has the highest average rent for industrial space at an average of $6.72 per square foot. Lehigh County is next with average leasing rates of $6.21.

By comparison the other regions are less expensive. The average rent for industrial space in York County was $5.21 and Dauphin County had an average lease rate of $5.46.

“In some cases we’re seeing Class A space at above $7 per square foot. It’s really unprecedented,” Ranalli said.

The corridor is still a bargain, rent wise for companies looking for light industrial properties in the Northeast when compared to North and Central New Jersey, so Ranalli said he expects rents to remain high for the foreseeable future

Fashion industry logistics provider coming to Phillipsburg

OMLog is moving into Bridge Point 78 in Phillipsburg, New Jersey. PHOTO/SUBMITTED –

A logistics provider to the fashion industry is moving into the newly developed Bridge Point 78 in Phillipsburg, New Jersey.

Italy-based OMLog is a logistics service provider for luxury fashion products offering supply chain solutions and retail assortments for national and international distribution.

The company will house its operations in Building 3 of the complex.

The Bridge Point 78 was developed on the site of the former Ingersoll Rand, which once employed more than 4,000 manufacturing workers in the area.

“Bridge Point 78 offered OMLog the ideal opportunity to expand its international operations in the heart of one of the Northeast’s main industrial distribution hubs,” said CBRE’s Jake Terkanian.

In addition to OMLog, the Class A complex is home to several big box tenants including UNIQLO and White Claw, he said.

“With Phase 1 of the development fully leased, we look forward to marketing Phase 2, which includes two additional buildings totaling over 1.6 million square feet, set to deliver next year.”

Jake Terkanian, Mindy Lissner and Vincent Ranalli served as the exclusive leasing agents at Bridge Point 78 and represented ownership, Bridge Development Partners and PGIM Real Estate, while Kevin Dudley, also of CBRE represented OMLog.

J.G. Petrucci buys Iron Run properties in Upper Macungie

6980 Snowdrift Rd., Upper Macungie Township PHOTO/CBRE

 

J.G. Petrucci Co. Inc. has expanded its industrial portfolio with the acquisition of two properties on Snowdrift Road in Upper Macungie Township.

CBRE had been marketing the properties and negotiated the sale on behalf of the former owner, Penwood Real Estate Management.

Penwood, of West Hartford, Conn., is a real estate investment advisory firm that was formed in 2003 and is dedicated to managing value-added real estate investments in the institutional market.

Petrucci, which has offices in Bethlehem, currently owns and operates over 4.5 million square feet of commercial, industrial, retail and residential properties.

The two Iron Run Lehigh properties at 6980 and 7020 Snowdrift Rd. total 135,082 square feet and are fully occupied with five major tenants.

Penwood renovated both properties while they were under its ownership.

6980 Snowdrift Rd., which is a 99,782-square-foot facility sitting on 10.59 acres, was renovated in 2018.

The other property, 7020 Snowdrift Road is a 41,390-square-foot property sitting on 4.09 acres. It was renovated in 2017.

“Iron Run has endured as one of the Lehigh Valley’s most consistent, well-located light industrial concentrations,” said CBRE’s Brad Ruppel. “These two buildings and their diverse tenant roster are emblematic of the adaptive functionality of this park. Investors continue to recognize the draw of locating at the heart of the region’s dynamic logistics infrastructure and labor concentrations.”

Terms of the acquisition were not disclosed.

CBRE 1-78/I-81 Commercial Real Estate Report: ‘If you build it they will come’

Berks Park 78- 20 Martha Drive, Bethel PHOTO/CBRE

 

Commercial real estate experts were expecting 2020’s industrial development boom to continue, but Mike Hess, senior vice president of CBRE in the Harrisburg office said industrial development along the I-78/I-81 corridor was even stronger than expected during the first quarter of the year.

The corridor, which runs through Central Pennsylvania, Northeastern Pennsylvania and the Lehigh Valley is literally busting at the seams and is growing rapidly with new construction projects to meet the demand.

According to the most recent CBRE market report vacancy rates are down to a low 6.3% and the absorption rate was high.

“There has been more than 3 million square feet of net absorption so far this year,” Hess said.

With 13 million square feet of space absorbed in all of 2020, “the Lehigh Valley, Northeast and Central Pa. are very well on to track to meet or exceed that.”

In response to an uptick in demand during 2020, developers grew the construction pipeline to 18 million square feet. Specifically, Central PA and the Lehigh Valley recorded over 3.2 million sq. ft. in new construction activity.

He expects that to be snapped up quickly by light industrial and logistics tenants, noting that even as construction increases, absorption rates have been keeping up with the rate of construction over the past several years. In 2015, for example, he said there was 8.4 million square feet of industrial construction with 7.9 million square feet leased out.

“It’s almost, to the square foot, balanced what gets built to what gets absorbed,” Hess said.

And while all that growth sounds great for the economy, it does have its drawbacks.

“We are going to be in the position where we are undersupplied,” he said.

The majority of sites that are good for development are already underdevelopment, and most likely already have tenants lined up, he said.

That has increased speculative development significantly.

Basically, to meet the pace of demand, developers can’t wait for a tenant to come to them. They need to have inventory ready so tenants can move in on the faster timetable that the market demands.

“You have to get out there and take a risk on the market, and those who have done it have been rewarded,” he said.

Even as the sector moves into the second quarter of the year, new projects are entering the pipeline.

“This whole region has turned out to be a spec market. If you build it they will come,” Hess said.

But for those companies looking to locate manufacturing or logistics facilities along the I-78/I-81 corridor – prices are skyrocketing. Just over last year, rents across the board have risen 20% to 25% going from an average of about $4.50 per square foot to about $5.50 and he expects rents to continue to trend upward.But, he said, it isn’t just a money grab, construction costs are also rising dramatically.

With the scarcity of land, commercial real estate space is selling for almost $40 per square foot right now, compared to only $20 per square foot in 2020.

Materials are also more expensive and harder to come by. In the competitive steel beam market prices are about $16 per square foot, $2 more than last year and there is a 40- to 50-week lead time on orders. Developers need to order what they need in advance so they have the materials in place in time for the start of construction. “Because of all these factors, new projects are going to have to have higher rentals,” he said.

With the high demand for such space developers and tenants are willing to pay the higher prices. “Industrial has become the new retail,” Hess said, and companies in apparel, consumer goods and food are looking to have production and distribution in the region.

Investors are also willing to pay the price.

The report said even though overall capital markets activity cooled slightly in the first quarter of 2021, it still generated more than $100 million in investment activity, and 2020 ended the year achieving nearly $1 billion in total capital markets activity.

The Lehigh Valley’s logistics boom is impacting wages, construction and infrastructure

Prologis Valley West in Alburtis is one of the new logistics centers currently in the pipeline along the I-78/I-80 corridor. PHOTO COURTESY CBRE

 

Since the start of the COVID-19 pandemic, growth in the e-commerce, logistics and transportation industries, which were already booming in the Lehigh Valley, has gone full tilt.

According to the Lehigh Valley Economic Development Corp., the Lehigh Valley’s gross domestic product for transportation and warehousing was $2.5 billion in 2019, and while newer numbers are not available, job growth statistics indicate that number should be dramatically higher today.

The number of jobs in the logistics industry grew from 22,005 in 2015 to 34,477 in 2020, according to the Lehigh Valley Economic Development Corp.

Reading-based Penske Logistics, which employs more than 10,000 truck drivers across the country, said the demand for drivers in the region is strong.

“We are seeing tremendous demand for truck drivers in the Lehigh Valley; it’s one of the most challenging driver markets in the country,” said Jeff Jackson, senior vice president of operations for dedicated contract carriage at Penske Logistics. “The local transportation companies that we hire to service our customers, to pick up and deliver freight regionally, have been kept busy by the work we have given them. These small companies in the greater Reading-central Pennsylvania-Lehigh Valley markets appear to be doing well in this environment.”

That demand for workers in the sector has led to higher wages, according to Don Cunningham, president and CEO of the LVEDC. Because of the demand, workers in the sector had an average weekly salary of $844 in Lehigh and Northampton counties by the third quarter of 2020. That’s led to nearly full-employment in the sector, he said. Even low-skilled labor at these logistics facilities are seeing starting wages that are generally higher than $15 an hour.

“These are wages we’ve not seen in our history for non-skilled workers,” Cunningham said. “Most regions in the country would kill to have full-employment for their non-skilled labor population.”

The need for logistics space, which includes pack-and-ship companies like Amazon, retail aggregators, like Zullily, third-party logistics providers and direct-to-consumer ecommerce companies, has kept the construction industry hopping.

The Lehigh Valley had nearly 9 million square feet of industrial and flex space under construction at the end of 2020, Cunningham said. By that measure, Lehigh Valley’s construction activity was among the busiest in the nation, ranking only behind Nashville and Austin. Much of that was in the logistics sector, he said.

Growth in the sector is so strong, the only thing hampering its expansion at this point is the availability of land, he said.

The pace continues

And, the construction isn’t slowing down. Much of it is in providing infrastructure needed to accommodate the increased traffic coming in and out of the region.

Lehigh Valley International Airport just announced plans to build space to meet the increased air cargo coming into the Hanover Township, Lehigh County airport. Since 2016 LVIA has seen a 165% increase in cargo traffic — going from processing 47 million pounds to more than 126 million in 2019 and 210 million during the COVID-19 bump last year.

The Lehigh Northampton Airport Authority recently hired Aviation Facilities Company Management LLC of Dulles, Virginia, to plan and develop portions of the airport’s property to help plan cargo, logistics and other airport facilities to help meet the demand.

“Developing air cargo infrastructure remains a strategic goal for the Airport Authority,” said Thomas R. Stoudt, executive director, LNAA.  “Partnering with the AFCO team on this important initiative will allow Lehigh Valley International to better serve our current air cargo demand, while providing expansion opportunities for new and existing businesses. This partnership will increase the ability of cargo carriers to serve the growing demand in our region.”

The increase in traffic, including truck traffic, has also led to the widening of a number of roadways in the Lehigh Valley, including Route 22 and Route 412. Right now the region is feeling the growing pains of the transition to a logistics-heavy region, with increased truck traffic and the sprawl of big-box buildings into suburban and rural areas. But, he said, with the infrastructure improvements that are coming, traffic issues should ease in the future.

“You need to adapt and you need to adjust, and that’s exactly what the Lehigh Valley is doing,” Cunningham said.

While issues like open space and farmland preservation are an important concern in the community and developers should be mindful of the impact of the construction boom, Cunningham said the growth is coming from the demand right in the community.

“Ask yourself how many products have you been ordering online and having them delivered to your door,” He said. “”Every package that has been delivered to my door versus me going to the store – that’s a truck that brings it.”

But for those concerned by the fast development of logistics and ecommerce facilities and the number of trucks on the road, Cunningham said he believes the boom is slowing.

“I think we’ve peaked as far as the large scale build out of logistics,” he said. “But, it’s still a great place to move your product and it’s also a great place to make your product.”

‘Reverse logistics’ of online holiday returns means boon to local commercial real estate

2020 Feather Way, Bethlehem, PA. This 294,240-square-foot building was delivered in November and is ready for occupancy. PHOTO/SUBMITTED

 

The COVID-19 pandemic has led to unprecedented online shopping for holiday gifts and supplies. But as anyone who has ever given or received a Christmas present knows – returns are an inevitable part of the process.

Since so many presents were bought online and shipped to the buyer, versus them going to the store to pick them out, those returning them will also have to mail those unwanted gifts back rather return them to store for something else.

A recent report by CBRE forecasts online returns to hit a record $70.5 billion this holiday season, a 73% increase from the previous five-year average. CBRE’s forecast, which is based on National Retail Federation data, estimates online purchases this holiday season will reach $234.9 billion, a year-over-year gain of 40 percent. With an average return rate of 30 percent for online purchases, it’s easy to see why the overall number of returns will jump significantly.

That’s an increase in what the industry commonly refers to as “reverse logistics” that should stretch the limits of an already overburdened ecommerce industry and drive demand for more logistics facilities in the commercial real estate industry.

Optoro, a provider of returns technology and services for processing retail returns and CBRE’s partner for the report, estimated that a reverse logistics supply chain requires an average 20 percent more space and labor compared with traditional forward logistics.

With such industrial space already incredibly tight, that presents challenges in the commercial real estate market.

The good news, says Vincent Ranalli, executive vice president for CBRE in the Greater Lehigh Valley, is this region is already well positioned to take advantage of, and ultimately handle, the demand. Because of the proximity of the Lehigh Valley in the Northeastern corridor of the U.S., that demand for logistics centers has been strong.

“There are new tenants each week that want to locate here,” Rannalli said. “We’ve had a record year. We’ve had the highest absorption rate for industrial properties.”

He said a good deal of that demand is coming from ecommerce companies and third-party logistics providers attracted to the location and amenities like Fed Ex Ground and the recently upgraded UPS facilities.

“In parts of the market, 500,000 square feet and up, there’s very little inventory. It’s pretty scarce. Sometimes two or three tenants are looking at the same building at a time. It’s very competitive,” Ranalli said.

Demand will continue

But as many in the commercial real estate industry have said, the COVID-19 related boon in ecommerce activity had just accelerated the demand for logistics facilities. The need will remain and grow even after the country comes out of the pandemic.

“There’s going to need to be more buildings built to meet the demand,” he said.

The region has already strong growth of speculative construction in logistics, so the commercial real estate market should be able to meet the demand, Ranalli said.

He cites two of CBRE’s projects, one at 2020 Feather Way in Bethlehem, a nearly 300,000-square-foot building that was finished in November and is ready for tenants; and the former 600,000-square-foot Ingersoll Rand property on Memorial Parkway in Phillipsburg, New Jersey, that has already received a lot of interest from potential tenants.

CBRE also participated in the September groundbreaking in Upper Bethel Township of the River Pointe Commerce Park, owned by River Pointe Logistics.

Other developers have also been bringing logistics center projects to the region recently. Core5 just announced it would soon begin a logistics center in Landsdale, Bucks County. Earlier this month, Transwestern Development Co. broke ground on the Hamburg Logistics Center in Berks County.

Ranalli said the reason that reverse logistics is creating such a demand for space and labor is because it is time sensitive.

“These goods need to be processed quickly or they lose value,” he explained.

For example, a warm sweater purchased in November wouldn’t be in high demand if it didn’t get back on a website for sale until spring.

That’s why bricks and mortar retailers have always put so much effort into post-Christmas operations making sure goods are returned, labeled and put back on the shelf as quickly as possible while the demand is still high.

Not all returns can be successfully discounted and put back in rotation. Optoro estimated that returns produce 5 billion pounds of waste in landfills annually.

The demand, of course, isn’t just in the Lehigh Valley.

CBRE Economic Advisors estimated that 1.5 billion square feet of industrial space will be added in the U.S. over the next five years to meet growing ecommerce demand.

Ranalli said also that companies that currently occupy second-generation space are expected to upgrade to these newly constructed buildings, which will allow reverse logistics occupiers to lease a greater portion of Class B space.

As much as 400 million square feet of this space could be used to process returns in the next five years.

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